Congress is sending a $1.7 trillion government spending package which includes about $345 billion in new deficit spending to President Biden. While a deal saves taxpayers from having to wait through more rounds of haggling to see if lawmakers will come up with a plan to fund the government through the next year, it represents yet another log on a blazing fiscal bonfire.
Included in the bill is approximately $85 billion in “emergency” spending, a designation intended for disaster relief or other urgent spending that is increasingly being used to stuff last-minute non-emergency spending provisions into omnibus bills. This is roughly split between Ukraine aid and other domestic spending that is better suited for the category.
The bill also includes a two-year waiver of PAYGO, a rule that is intended to trigger spending cuts when Congress spends above its means. Rather than paying the piper, Congress is getting around previously-enacted consequences for its fiscal irresponsibility by simply waiving them. Doing so will increase deficits by an estimated $260 billion over the next two years — and taxpayers should certainly not expect Congress to demonstrate more self-control the next time PAYGO comes back up.
And while the bill is loaded up with new spending, it failed to include what seemed to be a slam-dunk for legislators seeking to protect taxpayers from excessive paperwork burdens. Despite bipartisan support, the government spending bill is entirely mum on the issue of the Form 1099-K threshold.
The form that taxpayers and payment platforms are required to file to report peer-to-peer transactions, Form 1099-K is intended for taxpayers with substantial incomes from transactions that would otherwise go unreported. Nevertheless, there are many such transactions that are not, or should not, be of interest to the IRS, such as non-taxable sales of used goods.
So before 2021, Form 1099-K had a threshold of 200 transactions and $20,000 in sales before taxpayers had to file the form, ensuring that casual, non-taxable transactions did not need to be reported, and Form 1099-K was reserved for taxpayers who received substantial income from peer-to-peer transactions. But the American Rescue Plan Act changed that, removing the threshold for the number of transactions and requiring anyone with $600 in online sales to file a 1099-K with the IRS.
This meant that with the sale of a few used textbooks online, a taxpayer would receive a 1099-K from the platform they sold on. Taxpayers would then be expected to report this income to the IRS, even though it is almost certainly non-taxable. At best, this is a waste of everyone’s time and effort, at worst, confused taxpayers receiving a Form 1099-K for the first time may mistakenly report it as taxable income — because after all, why would they have received the form in the first place if it wasn’t relevant to the IRS?
Despite support from the nation’s largest organization of Certified Public Accountants and a bipartisan reform proposed by Sens. Bill Hagerty (R-TN) and Joe Manchin (D-WV), Congress declined to even vote on a fix to a problem of its own making. After all, who has time to save taxpayers from your own mistakes when you’re busy spending more of their money?
Fortunately for taxpayers, the IRS came in at the eleventh hour to administratively enact a one-year delay to the lower threshold’s implementation. But delays will only take taxpayers so far without a legislative solution.
Such anti-taxpayer legislation is the result of a budget process that incentivizes overspending and back-room sausage making rather than an open conversation about what this country is spending versus what it is able to spend. Absent a comprehensive reform effort to fix what is a fundamentally broken budget process, taxpayers can only expect more of the same.
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